Toshiba presses Western Digital for quick end to feud

US partner may lose access to new memory chips without deal ending arbitration

November 22, 2017 09:30 JST

TOKYO -- Toshiba appears closer to solving the dispute with U.S. partner Western Digital over the planned sale of the Japanese company's memory chip unit by the end of this month.

"We are definitely advancing step by step" toward a resolution, said a Toshiba executive who traveled to the U.S. last week to discuss terms. The two companies have been negotiating since October. But both sides continue haggling, and the jury remains out on whether a truce will result.

Western Digital has sought international arbitration to try to block the unit's sale, claiming the deal violates its joint venture contract with Toshiba. The U.S. hard-drive maker, which seeks a stake in Toshiba Memory, also is using the arbitration process as a bargaining chip to draw concessions from the Japanese technology group.

The spat boiled over in early August when Toshiba said it would invest unilaterally in new equipment at the Fab 6 production facility at the partners' chipmaking complex in Yokkaichi, Japan. Western Digital alleges that move violates contractual obligations as well.

Toshiba also has greenlighted additional investment at Fab 6, asking Western Digital whether it would join. If Western Digital does not decide to participate by the Nov. 30 deadline, the U.S. company risks harm to its business plans by becoming unable to procure cutting-edge memory products from that particular facility.

Western Digital holds firm, saying a possible joint investment in the Yokkaichi facility and the talks to cancel the arbitration represent separate issues, according to someone familiar with the negotiations. But Toshiba argues that a joint investment deal would require Western Digital to withdraw its arbitration claims, a position that pushes the disgruntled partner to make a decision by the end of November.

Toshiba has sought to close the memory unit's sale to a consortium that includes U.S. private equity firm Bain Capital before the end of March, the deadline by which the conglomerate needs to re-establish positive shareholder equity so it can remain a listed entity. Western Digital apparently seeks to limit influence over the Toshiba Memory business by rival SK Hynix of South Korea, a member of the consortium.

However, Toshiba announced a decision Sunday to raise roughly 600 billion yen ($5.33 billion) by selling new shares. This deal all but guarantees Toshiba will escape negative shareholder equity by March 31, even if the memory sale has not been completed.